Non-monetary gifts to charity.


T

Tim Woodall

Would the following be legal?

I have an item which would fetch 1000 (I expect - might be more) if I
were to sell it on, say, ebay.

However, instead of selling it, I'd like to donate it to a charity
that could use it[1].

But instead of giving the item to charity, I give them 1333. With gift
aid tax relief that is worth 1666 to them. They then buy the item from
me for 1000.

At the end of the year I then reclaim the additional 333 as a higher
rate tax payer.

As a result of this, I'm in exactly the same position as if I'd given
the item to charity but they're 666 pounds better off.

I would expect that there are restrictions on doing this as it could be
abused - for example I could give the charity 10x as much and then the
charity could buy the item from me for 10x its value.

Or, alternatively, is there any way of declaring a "non-cash gift" on
my tax return. Then I could just give the item to charity plus 533.
They'd then claim gift aid relief on the 533 and I'd claim 400 of
tax relief on the item and 133 on the cash gift.

The obvious way to do this is just for me to sell the item and donate
the proceeds to the charity and they then buy an equivalent item from
somewhere else. However, there are very few oportunities to buy second
hand and new the items are in the 3-4K price bracket.

Tim.

[1] This is very hypothetical at the moment - I've offered to loan it to
someone to see if it could be of benefit and it might turn out to be
completely useless.
 
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M

Martin

Tim Woodall said:
Would the following be legal?

I have an item which would fetch 1000 (I expect - might be more) if I
were to sell it on, say, ebay.

However, instead of selling it, I'd like to donate it to a charity
that could use it[1].

But instead of giving the item to charity, I give them 1333. With gift
aid tax relief that is worth 1666 to them. They then buy the item from
me for 1000.

At the end of the year I then reclaim the additional 333 as a higher
rate tax payer.

As a result of this, I'm in exactly the same position as if I'd given
the item to charity but they're 666 pounds better off.

I would expect that there are restrictions on doing this as it could be
abused - for example I could give the charity 10x as much and then the
charity could buy the item from me for 10x its value.

Or, alternatively, is there any way of declaring a "non-cash gift" on
my tax return. Then I could just give the item to charity plus 533.
They'd then claim gift aid relief on the 533 and I'd claim 400 of
tax relief on the item and 133 on the cash gift.

The obvious way to do this is just for me to sell the item and donate
the proceeds to the charity and they then buy an equivalent item from
somewhere else. However, there are very few oportunities to buy second
hand and new the items are in the 3-4K price bracket.

Tim.

[1] This is very hypothetical at the moment - I've offered to loan it to
someone to see if it could be of benefit and it might turn out to be
completely useless.
IME, you don't need to be so "devious". Leading charities use the gift-aid
relief rules as follows - so make sure you pick a charity which does this.

In brief, you sign a "gift aid" declaration when you hand over the gift.

They sell it "on your behalf" and offer you the money (by letter, later)

You say "keep the money".

Hence, you've made a money gift and all the usual stuff follows (i.e. you
claim HR relief, if applicable, and the charity claims its BR relief - and
at the "transitional" 22% rate, not just 20%, IIRC).

HTH
 
P

Pete Verdon

Martin said:
In brief, you sign a "gift aid" declaration when you hand over the gift.

They sell it "on your behalf" and offer you the money (by letter, later)

You say "keep the money".
I haven't followed the tax stuff, but you seem to be treating the item
purely as a token of value, and ending up with the charity selling it. I
got the impression from Tim's post that the charity would be using the
item for its intended purpose (whatever that is) and not selling it.

Pete
 
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M

Martin

Pete Verdon said:
I haven't followed the tax stuff, but you seem to be treating the item
purely as a token of value, and ending up with the charity selling it. I
got the impression from Tim's post that the charity would be using the
item for its intended purpose (whatever that is) and not selling it.

Pete
On re-reading the OP, I'm sure you're right. I'd missed TW's footnote about
lending and trying out the "gift" - sorry.

Maybe the item can be sold by the charity's gift-shop (say) to the charity's
office.

Failing that, it seems clear to me that TW's original proposal cannot work,
since the "cash gift" and subsequent "purchase" are linked transactions.
(Not to mention that "open market value" might be hard to establish.)

Perhaps the charity could suggest a solution...?
 

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